EY’s Global Capital Confidence Barometer found that around eight out of ten Australian and New Zealand executives expect local and global M&A markets to improve.
In addition, all of the Australian and New Zealand executives surveyed thought the state of the global economy was stable or improving.
EY Oceania leader of transaction advisory services David Larocca said private equity will continue to play a bigger role in competition for assets.
“As the hunt for high quality assets heats up PE looks set to deploy record dry powder,” Mr Larocca said.
“PE firms also have the flexibility to hold portfolio companies for longer and can wait out the cycle if conditions deteriorate.”
The survey found the strong confidence in both local and global economies by respondents was naturally reflected in their expectations of strong infrastructure spending, reflected by recent activities and announcements by both Australian and New Zealand governments.
Further, executives anticipate this investment will have multiplier effect on GDP, corporate growth and are hoping for new ‘city shaping’ infrastructure including improved transport and social services, the survey said.
However, 74 per cent of those surveyed were concerned about political stability, double the number from six months ago.
“This is not all that surprising given the relatively new government in New Zealand and ongoing political uncertainty in Australia,” Mr Larocca said.
“More broadly, executives are also concerned about geopolitical tensions and changes in trade policy and protectionism.”
Almost a fifth (18 per cent) of global executives see an increase in cross-industry acquisitions to be the hallmark of M&A this year, fuelled by the need to adopt new technology and digital capabilities.
In terms of the acquisition appetite of executives, the top five sectors are oil and gas, telecommunications, automotive and transportation, consumer products and retail, and mining and metals.
“Disciplined deal making is now a cornerstone of M&A. Greater availability and transparency of data is allowing executives to make better informed investment decisions,” Mr Larocca said.
“Executives will continue to look to M&A as a growth engine, but perhaps in contrast to some situations we observed before the financial crisis, they are comfortable in walking away from transactions when the strategic sums do not add up.”
The biannual study surveyed more than 2,500 executives across 43 countries.